Forum Replies Created

@MichaelL- i don’t disagree with you, and I probably misspoke to say that all the rights went away. However, when the contract says “you grant to us . . . all rights that you own” regarding performances – that’s not license language. That’s granting ownership. Art is right that it is only for a term, but for at least that term, the rights are exclusive to BMI.

Later language allows the writer to ask BMI for certain specific performances to be excluded but you have to stand on one foot and balance three plates on your head to successfully get through the exclusion language.

How I read it is that BMI owns the copyright, for the term, with regard to performances. I wondered how the PRO’s were able to compel the writer to pay the PRO royalties if the writer performs his/her work in a bar or restaurant. The writer signs over the performance rights to the PRO. That’s why.

OMG- I just realized that at least under the BMI agreement, we give away our copyrights to BMI:

From the standard form agreement:Except as otherwise provided herein, you hereby grant to us for the Period: (a) All the rights that you own or acquire publicly to perform, and to license others to perform, anywhere in the world, in any and all places and in any and all media, now known or which hereafter may be developed, any part or all of the Works.

In consideration of our granting our copyrights to BMI, it will pay us according to its “standard practices”, which can be little or nothing.

So, here’s the question in my mind. In your situation, the user pays, the PRO gets paid, and you don’t. General thought is that, at most the composer has a breach of contract claim against the PRO. I have to believe that there is a viable claim for breach of copyright. Either the user violates the copyright because the agreement contemplates non-payment to the composer, or the PRO violates copyright because it creates a scheme to bypass payment to the composer. Either way it is a known use without compensation.

The PRO is only an agent, it is not the owner of the copyright. How can an agent fulfill its duty of loyalty if it purposefully creates a scheme not to pay the principal when the agent gets paid.

Here’s a piece that I hadn’t thought of. Got info today from somebody I trust in one of the major satellite/cable companies. The majority of this company’s revenue comes from hotels – not from residential. With the shut-down of the hotels, the hotels are not paying their license/subscription fees to the satellite/cable companies. In turn, this company has stopped paying the networks its license/performance fees. It makes sense that most, if not all of the satellite/cable companies make their revenue from hotels – and are probably in the same position. ASCAP’s letter starts making a lot of sense. The networks have seen the revenue from some of their biggest customers dry up. So they will have to stop paying the PRO. ASCAP’s letter indicates that this has already happened.

BTW, congratulations on your win of the Raisin Bran commercial! That’s great to have it.

I agree with you that while some advertisers are dropping out, others will take their place.

As far as royalty payments, it will be based upon the overall drop of the ad revenue. I, like you, do not believe that content will fall off, at least for back end. It’s kinda like radio spins. However, (based upon your article) there will be a 12% drop in revenue. That means the TV type purchasers will be buying the same amount of content, but can only pay 88% of what they paid last year. Likely, those licensees will get their license fees reduced in a similar amount. So, assuming that the PRO’s can reduce their fixed costs in a similar dollar amount, royalties would go down 12% year over year on a per performance basis. That’s not including the complications the indies will create in the calculations.

I hope the PRO’s were not investing the money for the earlier quarters. The markets are down about 30% right now since the beginning of March Of course, this could explain why BMI paid its March payment and ASCAP is holding on to the April payment. They are dealing in hundreds of millions of dollars in royalties each quarter. Hundreds of millions cannot be moved quickly in the markets. BMI would have been moving its money for March right about the time of the market peak. ASCAP would have started moving its April money a week or two ago – after the drop. If that royalty money was in the markets, the execs are in the pews right now praying for a comeback. Otherwise, in a couple of weeks, they will be explaining to the composers where their money went. I hope that’s not the case.

“are you saying we must take a hit with everyone else? Will ASCAP staff and board members get pay cuts for their contributions?”

Unfortunately, yes. The hit will come in two forms. Those with the reductions in performances will be most directly hit. The indies, for example, may see a 50% reduction in performances. They’ll get hit hard.

Our side will see the reduction based upon my more complex analysis. Maybe 10%. The same number of identical performances year over year will yield less royalties this year.

You are right about salaries, etc. That’s why I deducted about $25 million in costs. A lot of the positions will be essential to their operations. Probably about 40 – 50% of their costs are salaries. So maybe $80 – 100 million total. Can they furlough more than 25-35% of their workforce and still operate? That’s a question they surely are working on right now.

I doubt the senior officers will get pay cuts. However, in their defense, it is times like these that they are working the hardest.

I don’t disagree with you that certain sectors such as TV may not be hit, or hit as hard, as other sectors. However, our PRO’s have made clear that their revenue is going down. I have to believe them. A vast majority of their revenues are from blanket license agreements. Some licensees will pay while others will falter. With the decrease in revenues, there is a smaller pot to pay out royalties for performances.

I suspect that the royalties earned for performances of two quarters ago is paid with current revenue, not revenue from 2019. So, these past performances are going to be affected by current drop in revenues. Also, I know nothing that says if PRO gets paid A, PRO must pay composer B. Rather, payment from PRO to composer is a moving target.

You mentioned radio as one of your examples. This is how I think it will work. Radio’s primary revenue is advertising. The radio station pays PRO its blanket license based upon the size of the market and advertisers.. Advertisers are now coming to the radio stations and complaining that they can’t pay their advertising bills because they have been shut down or sales are way off, etc. The radio station negotiates with the advertiser reducing the fee, holding off collection, or letting the advertiser go. In turn, the radio stations are going to the PRO’s (along with all their other creditors) and telling the PRO’s they can’t pay their license fees. The PRO’s are likely in negotiations with these stations (which are probably most to all of them) as we speak. The amount of spins will stay the same, but the payment per spin to the PRO will go down.

TV- how many Carnival Cruises or United Airlines advertisements have you seen lately? The Sandals resort in the Bahamas which was storming our airwaves is non-existent right now. Marriott and Hilton ads ran consistently. No more. How many baseball ads? None, If these advertisers cannot pay the station, the station does not have the money to pay the PRO, much less their rent, salaries and utilities.

I noticed that My Pillow ads have increased – probably because Mike Lindell received a great deal on the now open advertising time.

So, there is smaller pot of revenue feeding a smaller pot of performances. How is it divided up?

Ultimately, a straight line approach will probably be used. It’s the most apolitical. There will be an across the board cut in payment on a per performance basis.

It’s a great unknown right now. We’re riding down the first hill of the biggest roller coaster we have ever ridden. I don’t think I wanted a ticket to ride this one.

I have no idea what ASCAP will do, but they should pay based on what is being broadcast or “performed” on TV.

The PRO’s will no doubt do so. They only pay on performances now.

I come from the legal and accounting world. So I am approaching it more like one of those bean counters the PRO’s employ.

The PRO’s all have fixed costs that are not going to change much despite the fall in revenue. The identical performance that paid $20 last year (or $100 or $1000) will necessarily be less this year.

BMI touted last year that they paid out 85% of their revenue in royalties. Roughly, it was $1.3 billion in revenue and $1.1 billion in payouts. That means BMI has about $200 million in operating costs. All the PRO’s are warning significant reductions in revenue. So, let’s say BMI’s revenue falls 30% to $900 million. It’s costs will fall a little but not a lot. The costs may go down to $175 million. Making that assumption the money available for payouts will fall from $1.1 billion to $725 million – or 35%. Are there going to be 35% less performances? Probably not.

Also, under that model BMI will only be paying 80% of its revenue in royalties.

If the lawyers and accountants have their way with it, there will probably be an across the board cut of X% on all performances to bring it in to the lower revenue number.. That doesn’t mean that the royalty reductions will be the same as the percentage reduction in total revenue. There will be less performances to pay too.

Given the above, my best guess is that royalty payments year over year on the identical performance will drop about 10%.

@Music1234. I don’t disagree with you. This is the piece I don’t know. Is there an agreement between PRO and Old Reliable TV Network (or composers) that says that for every $1.00 of “advertising revenue TV networks collect” the composer gets X percent? If there is, my concern is not justified. My concern is if the PRO’s can unilaterally set (or reset) the composer percentage in their discretion.

So, if PRO gets $100 of advertising revenue and has been paying the composer $20, can the PRO say “times are tough, we are changing what we are paying you” and start giving the composer $15 of the $100?

@Music1234- What will be interesting over the next few months is how the PRO’s will calculate the royalty payments. I would not be surprised that for 20 performances that paid $20 six months ago, the same 20 performances will pay less moving forward. I don’t think it is so much “democratization”, it’s just the reality that the PRO’s have less revenue today than they did six months ago. The royalties will be adjusted to match current revenue streams.

Where I am going is whether the royalty paid is based upon the revenue received for the past performance, or is it based upon another criteria. In other words, is payment based upon an immovable percentage, or do they have discretion in adjusting the percentage after the fact. That’s something I don’t know. However, I suspect the latter.

I think the reduction in payment of royalties will be immediate. While we are paid in arrears by two quarters (at least for BMI), the PRO’s are experiencing the reduction of revenue now. I anticipate that there will be new formulas created where the royalty payments for 2019 4th quarter and maybe 2020 1st quarter will go down dramatically. (We generally have no control how much the PRO pays us per performance)

The temporary closing of the economy is going to have dramatic effect for a very long time. Even if it reopens in May, its going to take several years to recover. So many small businesses are being forced to close their doors. In many cases, the closures will be permanent.

Our music is used primarily for entertainment purposes – whether it is for sports, movies, TV, or video games. Also, in much of the entertainment, music is optional. As we learned in the TV/Film strike in the 1980’s, music is expendable in production.

Until people can get back to work and pay all their arrearages on mortgages and other obligations, entertainment is going to be low on their list. So, entertainment type business will be slow to recover and get back to full production. Since music is not a necessary item, less will be used. The use of music will climb somewhat more slowly than the entertainment companies themselves as they continue to try to cut costs.